SEBI sets the tone for some far-reaching shifts in capital markets
Of late, the SEBI board meetings have been a crucial forum for key decisions. The latest SEBI board meet on March 01st has also made some important decisions for the capital markets. Let us look at the implications of four such critical decisions.
SEBI fee structure
For a long time the equity market investors have complained that the cost of trading was too high when the statutory costs were considered. As a start, SEBI has decided to reduce the SEBI turnover fee for equity and F&O from Rs.15/crore to Rs.10/crore of trade value. For derivatives in agri commodity trading, the SEBI turnover fees have been slashed from Rs.15/crore to just Rs.1/crore. These moves are expected to even out the cost anomalies.
MFs in commodity derivatives
SEBI also permitted mutual funds and portfolio management schemes (PMS) to participate in exchange traded commodity derivatives, subject to the safeguards. This will give MFs and PMS an additional asset class to invest in as well as a means to hedge their underlying exposure to equities. In addition, Category III AIFs (Alternate Investment Funds) have also been permitted to deal with goods received in delivery against physical settlement of contracts. This move would deepen and broaden the commodity market.
Debt valuation for MFs
This was a significant announcement by SEBI considering the recent issues that mutual funds have faced on the debt funds front. As against the existing maturity limit of 60 days for amortized valuation, the new limit will be reduced to 30 days maturity. The MF valuation agency will also provide valuation of money market and debt securities that are rated below investment grade. However, AMCs will have the leeway to deviate from the valuations given by the agencies subject to documenting and recording of reasons for such deviations. SEBI has also maintained that the deviation of valuation price from the reference price cannot be more than 0.025% of the value.
Corporate debt restructuring
There have been persistent demands for giving the NCLT buyers exemption from making an open offer to shareholders. SEBI has decided to exempt such NCLT share allotments from the purview of preferential allotment rules as well as open offer requirements. However, there will be some conditions attached. This exemption will be restricted to scheduled commercial banks and financial institutions only. Also, the exemption will only be given to allotments made and approved under the Insolvency and Bankruptcy Code (IBC). This is likely to reduce the hassles for buyout of shares under IBC!